Heads I win, tails you lose

Who spread the rumor that the last economic crisis was a failure of free enterprise to create sustainable prosperity? To answer this question, we need to know who benefits the most from the political reaction to the crisis of 2008. The rumor brought a major change in all branches of government by galvanizing the young voter with mesmerizing promises of job security, free healthcare, high quality public education, global cooling, transparency and accountability in legislating new rules-and let's not forget the spanking of Wall Street and establishing world peace. Despite all claims that heavy-handed federal regulation is needed to protect ordinary people from the abuses of Big Business, such interventions raise the cost of entry into the market, thus serving the established regulated producers at the expense of taxpayers and consumers.

The corporations whose money pushed Barack Obama to the surface two years ago (aided and abetted by big labor unions) understand that a fundamental reshaping of America's philosophical, economic, and political landscape cannot be achieved overnight-even four years is not enough. If you must use democratic means to turn the people from a sovereign into subjects ruled by the future presidents, congressional elites, and their wealthy sponsors, you need a carefully crafted long-term "bait and switch" strategy. Last week's Democratic fiasco was not only anticipated, it also comes with future benefits for those interest groups. Losing the House to the Republicans in 2010 is probably the only way to save the presidency for Obama in two years (other than 10 million jobs created by George Soros)-like sacrificing the queen (don't flatter yourself, Nancy) to save the king in the game of chess.

By now it should be clear to everyone (except Paul Krugman) that markets are not responding to government spending as described in undergraduate macroeconomic chapters on fiscal stabilization. (That, by the way, is the reason why such chapters were marginalized in most textbooks for the last 30 years.) As more and more voters realize the counter-productivity of the "stimulus," the more and more politically expedient it becomes for the Democrats to give up some power to their GOP rivals. It's a no-brainer-the special interest groups behind Obama will either trick the Republicans into a series of political compromises and discredit them in the eyes of their most principled supporters or, if they don't fall for that, denounce them as irresponsible obstructionists and regain the votes of the moderate "independents." It sounds counterintuitive to seek to lose an election, but in this case it was a matter of political survival for the Democrats to retire some of their amortized horses. Giving a limited advantage to the opponents of Obama's political agenda now gives the president someone to blame for all his failures in 2012.